As the bull market for life sciences real estate continues its incredible run, tight inventory in key markets is offering emerging markets more potential to accommodate overflow and build their talent base, according to JLL’s new 2021 Life Sciences Real Estate Outlook. That potential, in part, informs the report’s new ranking methodology for top life sciences clusters, which shakes up the typical list of top regions.

Overall, the fundamentals are quite sound. Investor-owned lab space, which covers 150M SF nationally, roughly the size of the Chicago office market, is poised to rapidly expand. Lab real estate investment volumes in the 12 months ending in Q2 2021 hit $12.9B, a nearly 27% leap over the 12 months prior, which has led to record-breaking pricing across many markets. There is roughly 21.6M SF of lab space under construction as of Q2 2021, three-quarters of which is in the top three clusters of San Francisco, San Diego and Boston, which alone accounts for 11M SF. Boston’s 2021 lab space deliveries are all pre-leased, and half of the 8M SF expected to come online next year is already taken.

That concentration, of course, means other cities aren’t seeing as much of the forecast growth — in 2020, 70% of all life sciences funding flowed to just four markets: the San Francisco Bay Area, Boston, New York-New Jersey and San Diego. But the report suggests that may change, as a tight market in top cities, which is driving many developers to engage in costly retrofits, is creating the potential for overflow.

JLL’s new ranking system, which includes 18 variables focused on talent, industry concentration, innovation investment and lab real estate fundamentals, offered a few surprises. Los Angeles, for instance, was ranked No. 7, just below Greater D.C. Mid-Atlantic (including the biomanufacturing powerhouse of Maryland, which was ranked No. 4 last year), and Houston, widely touted for its Medical Center and a wave of new developments, didn’t crack the top 10. JLL’s report also grouped together New York and New Jersey (ranked seven and 10 last year), often separated in other such reports, which earned the combined region a fifth-place ranking.

In highlighting the Los Angeles market, the report noted that, “what Los Angeles lacks in a centralized cluster, it makes up for with talent, innovation, and institutional presence,” and importantly, JLL says it has the ability to easily soak up overflow demand from both San Diego and San Francisco.